Sebastian Tong's Profile

Stop pushing and we’ll do it

The growing acrimony in the international debate over China’s currency policy has led some to warn that Beijing could dig in its heels if pushed to hard to let its yuan rise.

But Barclays Capital says Beijing could let its currency strengthen as early as next month, notwithstanding its public resolve against Washington’s threat to label it as a currency manipulator.

“They do have a ‘If you stop pushing, we’ll do it’ attitude, which is kind of childish, really. But it will happen because they are the only country in the world, besides India, where there is a whiff of inflation,” says Barclays’ asset allocation head Tim Bond.

“It’s in their own interest. It’s the right thing to do.”

Barclays expects the relaxation of China’s de facto dollar peg to result in the equivalent of a five percent annual appreciation over the next year.

Investors should also keep the heightened rhetoric among U.S. lawmakers in perspective, Bond says.

“The anti-China lobbyists in the U.S. are a lot noisier than the pro-China lobbyists.”

[…] one important factor) but don’t want to be seen as doing so due to foreign pressure. This post from the Reuters Changing China blog backs this up, quoting the Barclays asset allocation head Tim […]

The problem of US external payments current account deficit has more to do with the lack of political will of US leadership to rein in the nation’s economic rigidities than the value of currencies of its trading partners. A nation that continues to spend more than it can earn, invest more than it can save, and consuming more than it can produce, must seriously address these imbalances than blaming countries with surpluses in the balance of payments current account.

Currency adjustments among trading partners would not necessarily address external payments current account imbalances among nations as evidenced in the aftermath of Plaza Accord. Japan continues to enjoy trade surpluses.

The anti-China lobbyists in the US should focus on their nation’s own structural economic rigidities that led to the deficit than assailing nations like China that have helped to finance US external payments deficit through capital flows.

The more childish thing is us Americans scapegoating on the chinese yuan as the cause of our problems. Its completely hypocritical as we promote a “strong dollar” policy. (Buy oil in Riyals and the trade deficit will immediately be a thing of the past.) Moreover, it goes completely against the spirit of freedom and free markets when we complain. The currency markets are the freest in the world. The chinese influence WITHIN the free market, they do not regulate it and are breaking no international laws, for every currency transaction they make it took another party to agree to it, they do not coerce. For us to whine is like blaming the restaurant for making us fat.

Rest assured once they let their currency strengthen our weak victim-like mentality will not cease. We may accuse them of too strong a currency as they buy up property and companies and/or blame new countries as production shifts elsewhere but not back to the USA. We will continue to blame them or someone else for our problems.

Why do the West feel justified to tell China what to do at every turn. It has become a bit of a joke when they are now relying on China to lead them out of the GFC.
I am immensely impressed of what they have achieved for their people. They brought hundreds of millions out of poverty. The improvement in living standards, infra structures and the progress in the economy etc were achieved at a speed that is unprecedented in the human history. In spite of all these accomplishments, the West still feel qualified to lecture them.
The current crop of Chinese leaders may not be as politically savvy or outspoken as the Western ones who have built up their experience at the world stage over the last century. The Chinese will be well schooled in seeing Western leaders lie, bully, manipulate, back flip, practice double standards, be arrogant and above all go to bed with the devils if it suits them-totally lack of morality and self respect. For this, I would say give the Chinese 15 years (time enough for 3 generations of new leaders), they will become as forceful, hard-nosed and arrogant as any of the Western leaders. Then two can play. Only then, may be the UN and the world bank would be able to do what they are set up to do instead of being manipulated in concert by any Dick, Tom and Harry of the West.

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